From CNN’s Non Sequitur Department: “Most economic forecasts have a big blind spot”… Because climate change!

“Sign used in some countries to warn of a blind spot ahead on the road” – Wikipedia

 

Definition of non sequitur

1 : an inference that does not follow from the premises; specifically : a fallacy resulting from a simple conversion of a universal affirmative proposition or from the transposition of a condition and its consequent

Guest ridicule by David Middleton

Honestly… I’m not picking on Real Clear Energy… But today’s headlines were a gold mine!

Most economic forecasts have a big blind spot: Climate change

by Lydia DePillis @CNNMoney
August 17, 2018

Heat waves that ground airplanes. Rising seas that drown waterfronts. Wildfires that consume whole cities and blanket the West Coast in smoke. [Human sacrifice, dogs and cats living together… mass hysteria!]

Climate change is having a real impact, not just on the environment but on the economy too. And a growing body of research by economists and climate scientists shows that extreme weather will weigh on economic growth even more so in the future. But almost no mainstream economic forecasting model takes that into account, in an omission that some economists say could affect the accuracy of economic predictions going forward.

The most recent study to quantify the economic impact of the carbon emissions that spur climate change was featured last week in a brief by the Federal Reserve Bank of Richmond. By evaluating the performance of state economies in previous years, the report found that every one degree increase in average summer temperatures decreases annual state-level output growth by between 0.15 and 0.25 percentage points.

[…]

CNN Money [or lack thereof]

Non sequitur: It does not follow from RCP8.5 bad science fiction prognostications that economic models have a “blind spot” to Gorebal Warming.  Most economic models explicitly exclude science fiction, especially bad science fiction like: Heat waves that ground airplanes. Rising seas that drown waterfronts. Wildfires that consume whole cities and blanket the West Coast in smoke.  When was the last time a wildfire consumed “whole cities”?  Small towns in Chile don’t qualify as “whole cities.”  What waterfronts have recently been drowned by rising seas?  Or are in imminent peril thereof?

Non sequitur: It does not follow from a heat-related reduction in summer productivity that economic models have a “blind spot” to Gorebal Warming.

By evaluating the performance of state economies in previous years, the report found that every one degree increase in average summer temperatures decreases annual state-level output growth by between 0.15 and 0.25 percentage points.

How about winter?  Shouldn’t Gorebal Warming also affect winter? For that matter… Shouldn’t an enhanced greenhouse effect have more affect on winter temperatures than on summer temperatures?  Shouldn’t its effects be most noticeable in Earth’s coldest air masses?  Wouldn’t a one degree (F or C) lead to greater productivity in winter?

I worked in Dallas from 1981-2015.  Every building I worked in was air conditioned.  I don’t recall the office ever being closed due to warmer than usual weather.  On the other hand, I lost entire weeks of productivity due to ice and snow storms that occasionally paralyzed Dallas.  Since 2016, I’ve worked in Houston and I’ve lost a grand total of 1 week due to weather: Hurricane Harvey. I actually lost more productive time when we moved our office to the other side of Allen Center than I lost to Harvey.

This doesn’t even qualify as a non sequitur; it is just bat schist crazy:

The missed connection is frustrating to Susan Joy Hassol, director of a nonprofit called Climate Communication that seeks to further public awareness of global warming. She thinks it’s partially due to the fact that economists and scientists often operate in different academic silos, which kept climate change economics a niche field until recently.

But climate advocates have also historically focused on how climate change affects the natural world — think polar bears — rather than people’s pocketbooks. Instead, conservatives have dominated the economic argument by saying that drastic measures to curb warming, such as imposing a tax on carbon emissions, would be more expensive than dealing with any potential effects down the line.

And that, Hassol says, is just not true.

“Every analysis that’s been done of this shows that action is far cheaper than inaction, and there’s a global clean energy race that we are currently losing, and that’s bad for our economy,” Hassol says. “We’ve got to break this out of the environmental and science box, because I think it’s first and foremost an economic story.”

The Obama administration had made strides in connecting climate to the economy, issuing a number of reports and also refining a metric called the “social cost of carbon,” which was used in tallying the costs and benefits of proposed regulations. The Government Accountability Office, which answers to Congress, continues to warn about the risk climate change poses to federal revenues.

[…]

CNN Money [or lack thereof]

Unmitigated bull schist.  A properly discounted “social cost of carbon” is less than…

OMB’s Whitewash on the Social Cost of Carbon

JULY 9, 2015

The “social cost of carbon” (SCC) is a key feature in the debate over climate change as well as the principal justification for costly regulations by the federal government. We here at IER and other critics have raised serious objections to the procedure by which the Obama Administration has produced estimates of the SCC.

Last summer I did a post on the GAO’s whitewash of our criticism, and now—just before the Independence Day holiday weekend—the Office of Management and Budget (OMB) has released its own whitewash.

There are several key points on which the Administration is obfuscating, but in this post I’ll focus just on the choice of discount rates. This one variable alone is sufficient to completely neuter the case for regulating carbon dioxide emissions using the social cost of carbon, so it is crucial to understand the controversy.

[…]

Why Do We Discount Future Damages?

Present dollars are more important than future dollars. If you have to suffer damage worth (say) $10,000, you will be relieved to learn that it will hit you in 20 years, rather than tomorrow. This preference isn’t simply a psychological one of wanting to defer pain. No: Because market interest rates are positive, it is cheaper for you to deal with a $10,000 damage that won’t hit for 20 years. That’s because you can set aside a smaller sum today and invest it (perhaps in safe bonds), so that the value of your side fund will grow to $10,000 in 20 years’ time.

In this framework, it is easy to see how crucial the interest rate is, on those safe bonds. If your side fund grows at 7% per year, then you need to set aside about $2,584 today in order to have $10,000 in 20 years. But if the interest rate is only 3%, then you need to put aside $5,537 today in order to have $10,000 to pay for the damage in 20 years.

An equivalent way of stating these facts is to say that the present-discounted value of the looming $10,000 in damages (which won’t hit for 20 years) is $2,584 using a 7% discount rate, but $5,537 using a 3% discount rate. The underlying assumption about the size and timing of the damage is the same—the only thing we changed is the discount rate used in our assessment of it.

Discount Rates in Climate Policy

Generally speaking, the climate damages that occur in computer simulations don’t begin to significantly affect human welfare in the aggregate until the second half of the 21st century. In other words, the computer-simulated damages need to be discounted over the course of decades and even centuries. (The Obama Administration Working Group used three computer models to calculate damages through the year 2300.) Thus we can see why the choice of discount rate is so crucial.

In its latest revision, the Working Group estimated that for an additional ton of carbon dioxide emitted in the year 2015, the present-value of future net damages would be $11 using a 5% discount rate, $36 using a 3% rate, and $56 using a 2.5% rate (see table on page 3 here). Yet when the media refer to these numbers as “the social cost of carbon,” it obscures how arbitrary the figures are. They can range from $11/ton to $56/ton just by adjusting the discount rate in a narrow band from 5% to 2.5%.

Violating OMB’s Clear Guidance

Fortunately, OMB provides explicit guidance (in the form of “OMB Circulars”) to federal agencies on how to select discount rates. Specifically, as we carefully explain on pages 12-17 of IER’s formal Comment, OMB Circular A-4 (relying in turn on Circular A-94) states that “a real discount rate of 7 percent should be used as a base-case for regulatory analysis,” as this is the average before-tax rate of return to private capital investment.

Now it’s true, Circular A-4 goes on to acknowledges that in some cases, the displacement of consumption is more relevant to assess the impact of the policy under consideration, in which case a real discount rate of 3 percent should be used. Thus it states: “For regulatory analysis, you should provide estimates of net benefits using both 3 percent and 7 percent” (bold added).

[…]

IER

OMB guidance clearly states that “’a real discount rate of 7 percent should be used as a base-case for regulatory analysis,’ as this is the average before-tax rate of return to private capital investment.”

SSC

Figure 3 from Nordhaus (2017), modified by author. A linear extrapolation of Nordhaus’ discount rate plot implies that a 7% discount rated would zero-out the social cost of carbon.

A 7% discount rate essentially makes the NPV of the Social Cost of Carbon $0 or negative.

A 7 percent discount rate, which has been used by the EPA for other regulatory analysis, could actually lead to a negative carbon cost, which would seem to imply that carbon emissions are beneficial.

Bloomberg

In 2014, the IEA put the global cost of deep decarbonization at $44 trillion.  According to the BP’s 2017 Statistical Review of World Energy, in 2016, the world’s primary energy consumption was 13,276.3 million tonnes of oil equivalent (MTOE).  US consumption was 2,272.7 MTOE, 17% of the total.  That would make our share of decarbonization $7.5 trillion.

If we accept that climate change is currently costing us $35 billion per year ($350 billion over past decade) and accept the GAO’s estimate of future costs:

A November 2016 assessment by the Office of Management and Budget (OMB) and the Council of Economic Advisers found that recurring costs that the federal government incurred as a result of climate change could increase by $12 billion to $35 billion per year by mid-century and by $34 billion to $112 billion per year by late-century, the equivalent of $9 billion to $28 billion per year in today’s economy.

GAO

The total cost of climate damages to the US by 2100 would be $161 trillion.  Would it make sense to spend $7.5 trillion now (or in the near future) if it averted $161 trillion worth of damages over the next 83 years?  No fracking way!

If we took $7.5 trillion today and put it in 30-yr Treasuries at 2.9% (assuming a constant interest rate), we’d have nearly $80 trillion in 2100.  If we employed that capital at a 7% return, we would have nearly $2.1 quadrillion by the turn of  22nd Century… enough to pay for the speculative cumulative climate damages 13 times over.

The fact the I  used  the GAO’s estimates of the costs of climate-related damages in my calculations, does not mean that I agree with them.  There is absolutely no basis to support the claim that the $350 billion spent over the past decade in response to extreme weather and fire events was even remotely related to climate change or greenhouse gas emissions.  Nor is there any evidence that decarbonization of our energy infrastructure will avert any future expenditures in response to extreme weather and fire events.  However, even if I accept the GAO numbers as valid and related to climate change, a 7% discount rate zeroes out all potential speculative benefits of carbon regulations.

The Obama administration had made strides in connecting climate to the economy, issuing a number of reports and also refining a metric called the “social cost of carbon,” which was used in tallying the costs and benefits of proposed regulations.

Note to Ms. DePillis: The Obama maladministration has been gone for 20 months… MAGA!

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71 thoughts on “From CNN’s Non Sequitur Department: “Most economic forecasts have a big blind spot”… Because climate change!

    • … and the missed connection is frustrating. It’s partially due to the fact that economists and ufologists often operate in different academic silos, which has kept ufology economics as a niche field.

      An honest robust discussion will lead to the strong platform that is necessary carry this niche field into the forefront of public good. Reptilians and their denialist cohorts will try to quell the conversation at all levels; since the future of our grandchildren is at stake, we need to do everything that we can to deny them in their attempts at denialism. Every effort … from consolidating our political clout, enhancing the financial leverage, and interupting them as they eat soup at the neighborhood deli needs to be implemented.

      Its for the kids.

  1. ridicule by > Latitude
    You can forget the news…all they are interested in is promoting their agenda and overthrowing Trump
    …when they are not caught lying and lying

    Venezuela…not in the news
    …South Africa..not in the news
    on and on

  2. Climate change nutjobs having input into quantitative economic forecasts is about the ultimate in back seat drivers…. from the infant safety seat.

    • From the twice nothing is still nothing department: The good news is that they won’t actually make the economic forecasts worse. link It’s true. They’ll still be just as accurate as they were before. 🙂

    • Infants are usually quiet when riding in their seats. These toddlers need to go back home and not get any cookies.

  3. In the immortal words of Jethro Bodine, naught into naught is naught. That boy really was a super genius compared to these idiots.

  4. Now, it is garbage reporting on CNN. The creator of Fake News.
    Who cares?
    Last, it was garbage reporting on CBS. A purveyor of Fake News.
    Who cares?
    Before that it was garbage reporting from The Guardian. Not even news, just Fake.
    Who cares?

  5. “What waterfronts have recently been drowned by rising seas?” Jakarta but its sinking rather than seas rising. Sinking at a rate orders of magnitude greater than sea-level rise. Still a few decades from needing to be abandoned (northern areas) so we will get a great idea of how humans can mitigate any possible massive sea level rise.

  6. one degree increase in average summer temperatures decreases annual state-level output growth by between 0.15 and 0.25 percentage points.

    So, a commission sales rep making $100,000 per year might expect their income to decline to $99,750. Oh the humanity! And that $250 decline is spread out over several decades as the temp (supposedly increases)

    If you then assume an even modest 2%/year economic growth over those same decades, that commission sales rep is making SO much more money that the $250 is meaningless.

    Don’t you just love it when their own numbers make them look silly?

    • David, you missed the point that the reduction was in the “…annual state-level output growth…” This is based on assumptions of the relationships between output growth and temperatures. We would need to see the statistical work before agreeing to their “estimates”.

      In your example, you would estimate how much the $100,000 would have grown, then deduct a minuscule percentage.

      • You would still have to run the numbers for winter, spring and fall. Warmer winters would almost certainly correspond to higher productivity.

  7. Most economic forecasts
    are not worth anything
    with or without a wild guess
    for climate effects !

    As a group, economists have never
    predicted a US recession !

    Some of them even claim
    a $15 minimum wage would not
    hurt young, unskilled people
    looking for their first job !

    Global warming, other than the
    government funds wasted
    studying it (making wrong wild guess
    climate predictions every year)
    benefits the economy by
    accelerating plant growth,
    with NO harmful effects
    except in the imaginations
    of power-hungry leftists !

    My climate blog, since 2015:
    http://www.elOnionBloggle.Blogspot.com

    My economics blog, since 2008:
    http://www.EL2017.Blogspot.com

    • “I believe that economists put decimal points in their forecasts to show they have a sense of humor.” – William Gilmore Simms

  8. Speaking of a blind spot! They are blind to the main method that global warming impacts (in a negative manner) our country’s productivity… All the money and mental effort being thrown into the hysteria! All the rules and regulations they create to combat it. All the people they put out of work.

    I wonder what the world will be thinking in 20 years, after the hysteria has moved on to something else, and all these ugly wind turbines need to be torn down (because other forms of energy will be so much cheaper than wind). Will the economists insert a “Junk the Wind Turbines Job Program” prediction to account for that? Oh wait, by then it will likely be mostly robots doing the work – never mind.

    I will be glad to get the beautiful hilltop scenery back that we used to have in western Texas. Its all covered in wart-like objects now.

  9. Odd.
    The attempts to stop CAGW cost trillions of dollars and did nothing.
    Now, not attempting to stop CAGW will cost us trillions of dollars.
    I smell politics.

  10. Of COURSE you are picking on Real Clear Energy – but only because they fully deserve it. Don’t apologize for pointing out their stupidity, you didn’t write their stuff.

  11. This is also (as usual) the “hottest year evah!” Correlating the GDP and temperature records, it seems that more heat actually increases economic growth.

    Note, that is a completely bogus correlation, much less any kind of causation. As is the “study” cited. The productivity of an individual State has nothing to do with the temperature; it is almost entirely controlled by governmental economic policy and level of corruption (Federal and State, and smaller divisions in some cases such as NYC), and slightly related to local extreme weather events (over short terms, not long).

  12. that some economists say could affect the accuracy of economic predictions going forward. (my bold)”

    If any economist actually said something that stupid, s/he missed a great career as a climate modeler.

  13. lts looking like Autumn is coming to greet the western USA early this year and after enjoying the recent hot weather it may come as a bit of a shock.. As a large autumn low looks to be making its way across the west on the 28th.

    • Winter still has its icy fingers around the throats of us antipodeans down under. plenty of negative temps around the country with even Alice Springs in the ‘hot’ dry centre still has 0C overnight temps.

      Looking forward to seeing Spring but I’m sure there is an iceberg parked a couple of kilometres from my place in the Adelaide Hills.

    • Oh please, come. This has been one of the worst summers of my 29 years out here in the Mojave Desert.

  14. You could also call this circular logic, since most climate forecasts don’t work because even with all the money in the world available the wealthiest among us still can’t pay someone to write a software program that will predict the market, even though the stock market is a simpler problem than the climate.

    • The second axiom of Psychohistory would apply.

      If someone understands enough to write such a model, somebody else would use it to manipulate the markets, invalidating the model. Like the Hunt Brothers or the Gold Certificate market. Oh, wait….
      And somebody would use it to fix the elections. Like the Clinton News Network. Oh, wait…. they did and only the appearance of a clown disrupted the scam.

  15. We should mention that no real estate company in the world devalues any ocean front property because of possible effects of climate change. No insurance company in the world bases future rates of property protection on computer climate model projections of catastrophy. It is all based on past events. Since climate change has not caused any more extreme weather events than there ever was, there is NO reason to think that the future will be any different. The economic effect of climate change is felt by unwarranted subsidies to the green revolution and carbon trading and carbon taxes and other regulations that assume that CO2 is a pollutant. As soon as CO2 is recognized as NOT being a pollutant, then the climate industry comes to a halt. How all the world’s media and politicians could have fallen for this hoax is beyond belief. I guess a generation of indoctrinating children is the reason along with a cabal of lying climate scientists who have been group thinked by a subset of evil climate scientists into believing a fantasy.

    • Insurance companies only care about what is likely to happen in the next 6 to 12 months, since that’s how long most insurance policies are written for.
      Something that won’t happen for 100 years (if ever) will be worried about in 99 years.

  16. The CAGW sc@m will go down as the biggest and most expensive Leftist government boondoggle in human history..

    CAGW’s original plan was for world governments to waste $76 Trillion (2008 UN estimate) to replace fossil fuels with wind/solar over the next 40 years to keep global warming below 2C by 2100…

    It turned out that we can keep using fossil fuels at current levels and not spend a DIME on insanely expensive/inefficient/diffuse/intermittent/unreliable wind and solar infrastructure and enjoy around 0.6C~1.2C of beneficial CO2 warming by 2100.

    Leftists have a difficult time with: logic, reason, ethics, math, science, and economics.

    Leftists’ CAGW policies have already curtailed billions of the world’s abject poor access to cheap fossil fuel energy which is already costing millions of lives per year and severely delaying economic development of these destitute countries in which they live.

    In advance countries, the repercussions of the opportunity costs of wasting $76 trillion on CAGW will eventually cause $quadrillions worth of lost: technologies, new industries, new life-saving drugs and medical advancements, lost research funding for real scientific studies, decreased living standards, higher unemployment, increased welfare expenditures, increased national debts, devalued currencies, reduced GDP growth, higher inflation, higher interest rates, higher commodity costs, reduced productivity, etc., etc. etc., and all these losses are compounded over time…

    CAGW is at the beginning of its end. We’ve had roughly 22 years of no statistically significant global warming, despite 30% of all manmade CO2 emissions since 1750 being made over just the last 22 years… and counting..

    Within 5 years, I predict more and more scientists outside the CAGW cabal will expose CAGW as a disconfirmed hypothesis, and then this CAGW debacle will crash and burn.

    Moreover, voters will start actively voting against pro-CAGW politicians, and this will ultimately be the demise of CAGW–follow the money…

    The longer Leftists let this CAGW sc@m continue, the bigger the blowback will be against them once this folly ends…

    • Sometime around the year 2000 people got stupider. I havent figured out yet why. Maybe because I got stupider too. However the scientific method seems to have got thrown out the window along with all understanding of statistics in climate science.

      • I think it was well before that around the time when movies were invented especially after Disney and Hollywood.

      • It actually goes all the way back to Theodore Roosevelt who first introduced the destructive philosophies of Hagelism (precursor of Socialism, Communism, Progressivism) into the US and used the insane Sherman Anti-Trust Law to slowly destroy capitalism in the US.

        Woodrow Wilson was the first president to officially implement “Progressive” policies (I hate that term; should be called Regressivism) where he constantly attacked the US Constitution, dismantled much of our Constitutional checks and balances, rescinded the power the states to select Senators (17th Amendment), introduced income taxes (16th Amendment), which lead to vastly increased government power, bureaucracy and federal spending.

        Hoover and FDR then vastly increased federal involvement in commerce (price controls, production quotas, HUGE welfare programs, started the Social Security Ponzi scheme, minimum wage laws, insane labor union laws, massive private sector rules/regulations/mandates, etc.) which are a HUGE drain on our economy.

        JFK then allowed public-sector unions, and LBJ then blew up Federal spending with his gigantic “War on Poverty” welfare programs, and then Leftist Regressives (aka Progressives) started targeting US public schools in the 1960’s to become indoctrination camps for Progressive propaganda…

        Leftists teachers have managed to destroy the US public school system to the point where the US is now ranked 38th in math and 24th in science among all industrialized nations, despite US educational spending being one of the highest per pupil in the world… Nice going, Lefties…

        Trump is urgently trying to “drain the Regressive swamp”, which is why Leftists are suffering from a severe case of Trump Derangement Syndrome (they hate seeing their Regressive powers base dismantled), and also why our economy is BOOMING after just 18 months of deregulation and tax cuts…

        There are over 100 years of Leftist Regressivism that needs to purged from the body politic, which will take time.

        Hopefully another anti-Regressivism president will carry on the long task after Trump serves his 8 years in office….

        We’ll see…

  17. There is a great Monty Python sketch where a knight guides an unruly mob of peasants through the logic of determining if a woman is a witch. Its goes:

    What do we do with witches?
    Burn em!!!!
    What else burns?
    errrr, wood?
    Yes , and what can wood do?
    errrr, they make boats out of it , it floats!
    Good, what else floats?
    Ducks!! Ducks float!!
    Correct. So the answer is simple. Just weigh the woman and if she weighs the same as a duck, she is a witch!

    These people seem to come from this school of logic. I am often reminded of this sketch when reading some of the dross that comes out of the alarmist camp.

    • Everything about CAGW could have been written by the Monty Python team or even John Cleese and Connie Booth.

      And now for something completely different.

  18. CNN Panelists are very brave people.
    They do their shows with no visible signs of paramedics or ER groups present.
    This is amazing, because as soon as the words “climate” or “Trump” are uttered, the poor souls start to hyperventilate something terrible.

    • Toss in the fact that that the Haber-Bosch process (natural gas to fertilizer) feeds half of Earth’s population.

  19. “Heat waves that ground airplanes. Rising seas that drown waterfronts. Wildfires that consume whole cities and blanket the West Coast in smoke.”
    She forgot lions and tigers and bears. Oh my! Sometimes I wonder if Alarmists ever actually hear themselves.

  20. “But almost no mainstream economic forecasting model takes that into account..”
    — Economics is a branch of science. The complaint is that there is a scientific consensus that global warming will not have a negative economic impact.

  21. State-level economies have very high estimation errors making statements about climate change impact within that noise meaningless.

  22. There are some many thousands (millions?) of factors which will come together to make up the economic future 100 years from now, all significant by themselves and dependent on each other, with chaos added in, that calculating how another chaotic non-linear poorly-understood factor (CO2) will change all that is virtually impossible. I don’t even know how you could come up with a reasonable guess.

    For example, I’d say a much bigger factor than CO2 even under the worst scenarios for it would be what kind of political and economic policies hold sway during the coming decades. If socialist governments take over and liberal politicians are in charge, the economy will go into the dumpster regardless of climate changes, to be followed thereafter by a couple world wars.

    Care to factor into your analysis what the effects of a couple limited nuclear exchanges will be on the economy and climate then?

  23. Obama showed the way in tricking and manipulating the OMB with Obamacare impact analysis. That was just a taste of future manipulation for policy over reach Progressive agendas.

    • Well, their ‘fact-checking’ is usually from the same sources that fed them their propaganda in the first place.

  24. Gosh, what with the infallible accuracy of climate models and the settled science, why would there ever be a blind-spot? I mean, uncertainty should be a thing of the past.

  25. Heat waves that ground airplanes. Rising seas that drown waterfronts. Wildfires that consume whole cities and blanket the West Coast in smoke. [somethings missing here. uh yes] –

    Ice shields that bury landscapes.

    La-La-Land revisited.

  26. David Middleton, if the Brüning Reichs Government had your thoughts on “Discount Future” then there would have been no WWII:

    The German Reich government would have paid the war reparations to France 40 years after from petty cash.

    And if the grisly black zero, German Finance Minister Schäuble, included “Discount Future” into forecasts, the EU would not be such a degenerate helpless bunch today.

    But – because the Greek Prime Minister Tsipras has reviewed similar thoughts on “Discount Future” with Varoufakis

    – he bought 4 very expensive nuclear-powered submarines from Germany to stop the Turkish-Ottoman-Islamic expansionist drive across the Balkans into the EU.

    And that’s hope.

  27. David Middleton, your articles – not my mileage.

    Your thoughts – Prima Vista.

    Regards.

  28. by the way – Merkel is back in Georgia with CIA and American military advisers. What comes next.

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